Document Type

Article

Publication Date

2013

Keywords

philanthropy, innovation, charity, business

Abstract

Each generation creates its own philanthropic bodies, with novel structures promising both increased sustainability and efficiency. From the seventeenth-century financial imperialists to today’s internet entrepreneurs, innovation, wealth, and philanthropy have moved in tandem, shaping one another and resulting in new philanthropic forms.

The most recent of these emerging entities is the “for-profit charity,” which relies on market profits and market principles to replace donations and to maximize its impact. Current philanthropic literature praises these market-based structures as revolutionary innovations that enhance long-term sustainability, and the focus of legal reforms falls along these lines. Yet the legal literature fails to fully appreciate the lessons of history. Although state after state is authorizing or fostering the growth of such hybrid entities, and although these entities do have the potential to contribute to philanthropy in novel ways, without a broader set of legal and regulatory reforms, the new philanthropic entities now emerging will be unable to meaningfully harness market forces to enhance their philanthropic endeavors.

The Articles argues that the key philanthropic innovation transforming society today is not the public-private hybrid model. An examination of the history of philanthropic innovation in the U.S. and in other nations exposes what the current legal literature largely overlooks. That is, historical and comparative case studies reveal that meaningful and lasting philanthropic change arises when philanthropic entities are able to capture and utilize the market innovations that are transforming society and leading to bursts of industrial or technological progress. Thus, groundbreaking philanthropic change comes when charitable entities can harness such transformative commercial and technological developments towards charitable ends.

In this light, the most critical philanthropic innovation transforming society today is not the public-private hybrid idea, but rather the little-studied phenomenon of firms applying to philanthropy the ideas that made them successful in the marketplace. Understanding this underappreciated nexus between business and philanthropy is vital for harnessing the larger potential of new philanthropy, as well as for promoting regulatory action that can enhance both business and philanthropic innovation. Recognizing philanthropic entrepreneurialism as a reflection of, and reaction to, commercial innovations such as the development of capital-pooling models or internet social networks, is imperative for the design of a more proactive and efficient regulatory regime.

Publication Citation

64 Alabama Law Review 1121 (2013).

Disciplines

Entrepreneurial and Small Business Operations

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